Globalization, Institutions, Asset Endowments and Poverty Reduction Outcomes in Africa within the Context of the Financial Crisis: Establishing a Transmission Mechanisms

This paper establishes a transmission mechanism linking globalization, institutional setups, asset endowments and poverty reduction outcomes in Africa within the context of the current financial crisis.

The current financial crisis has rekindled fears given the fragile state of economies of developing countries and increasing globalization. The trend towards protectionism by developed countries has highlighted the importance of an institutional framework to protect fragile industries. The current financial crisis also exerts serious threats on how households acquire assets and how they transform these assets into income.

The paper identifies different sub-channel circuits as well as the complex and indirect linkage between globalization and poverty. It recommends that governments should:

• Consolidate macro and micro institutions that act as safety nets to the forces of globalization during periods of crisis;
• Consolidate and enhance asset accumulation of the poor and rural population during crisis period;
• Strengthen fragile industries;
• Empower human capital in order to reduce poverty;
• Consolidate development during crisis situations.